Background
President Stores had traded for over fifty years as a high-end ladies fashion retailer, and had seven stores in prominent locations in Gauteng trading as Shirleys, L’Estelle and D’Ore.
Primarily, as a result of reduced sales, poor credit and declining profit margins, President Stores had been experiencing acute financial difficulties and had consequently commenced with Business Rescue proceedings on the 23 August 2011.
Challenges
- Downturn in the economy
- High fixed cost base
- Over stocking
- Over pricing of merchandise
- Poor management information systems
- Changing of business model from a credit model to a cash model
Solution/Strategy
- Refining the retail footprint by cancelling leases of stores that were unprofitable
- Intensive debt collection process initiated
- Reduction of stock holding through cash only discounted marketing campaign
- Sale targets and staff incentives were implemented
- Formal sales process was entered for the sale of various stores
Results/Outcome
The Business Rescue proved to be very successful achieving the following:
- Secured Creditors were paid in full.
- Preferent Creditors, most notably employees received their full retrenchment packages.
The dividend paid to creditors was significantly higher than what would have been paid in a liquidation.
Matuson & Associates received the Turnaround Management Association of South Africa runner up award in the small to medium Business Rescue category in 2014 for this successful Business Rescue.